Homeownership is often seen as a cornerstone of the American Dream, but a recent study by Real Estate Witch has shed light on the hidden costs that can turn this dream into a financial nightmare for many. The report titled “The True Cost of Homeownership 2024 Data” surveyed 1,000 homeowners and found that the average homeowner spends $17,958 annually on expenses beyond their mortgage, which is 78% higher than the expected $10,094.
Understanding the additional costs
These additional costs include homeowners insurance, property taxes, utilities, renovations, and maintenance. With interest rates around 7%, and the housing market experiencing falling prices due to lower demand, homeowners are facing a tough decision: to buy, sell, or hold onto their properties. The study reveals that 36% of homeowners feel their home is a financial burden, and 23% report a negative impact on their mental health due to the associated costs.
The debt dilemma
Many homeowners are dedicating at least 10% of their income to cover these costs, with some resorting to credit card debt, loans, or even selling valuable possessions to afford their homes. The Department of Housing and Urban Development considers housing unaffordable when it exceeds 30% of one’s income, a threshold surpassed by many due to these unforeseen expenses.
Buyer’s remorse among homeowners
The financial strain has led to approximately 67% of homeowners regretting their purchase and over 40% of recent buyers feeling they overpaid for their property. The report indicates that homeowners can accumulate up to $100,000 in additional expenses in just over five years and a staggering $538,740 over a 30-year mortgage period.
The shift towards selling and renting
About 295 homeowners surveyed are considering selling their properties within the next five years due to these unmanageable costs, with more than a quarter expressing a desire to return to renting. Current homeowners suggest that aspiring homeowners consider factors such as purchasing low-maintenance properties, negotiating prices, saving more, and waiting for favorable mortgage rates.
Advice for future homeowners
For those looking to buy, it’s important to be aware of the full spectrum of homeownership costs and consider strategies to mitigate them. This includes thorough inspections, opting for less expensive homes, and seeking financial assistance, such as parental help, which has been a route for over one-third of Gen Z and millennial buyers.
